Corporate Plan 2018-2021 · Corporate Plan 2018-2021 3 Foreword TPR is changing and in this Corporate Plan we set out what we are doing to become a clearer, quicker and tougher regulator

May 2018

Corporate Plan 2018-2021

Corporate Plan 2018-2021 2

ContentsForeword 3

Our vision and values 5

Introduction 6 Our approach to risk and regulation 6

The pensions and risk landscape 8 Pensions landscape 8 Risk landscape 9

Our priorities 11

Evaluation 16 Outcomes 16 Key Performance Indicators 17

Our structure 20

Financial summary 21 Funding 21 2017-18 financial results 21 2018-19 budget 22 Staff numbers 24

End notes 25

How to contact us back

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ForewordTPR is changing and in this Corporate Plan we set out what we are doing to become a clearer, quicker and tougher regulator. Over the next year you can expect to see us improving our effectiveness further by taking action in a broader and more visible way to improve outcomes for retirement savers. We will ensure our expectations are better understood and use a wider range of regulatory tools, with the aim of putting things right and keeping schemes on the right track for the long term so members receive the benefits to which they are entitled.

We continue to see changes in the wider pensions landscape that impact our organisation and the industry, and create new challenges – for example continued uncertainty in the macro economy and the significant shift of savings into defined contribution (DC) schemes. The way we work will undoubtedly need to evolve further to reflect these and other ongoing developments in the sector.

It is important that we keep pace with the evolving landscape, take into account the social, economic and political environment, and are able to adapt to changing risks. In this Corporate Plan we set out the direction in which we are heading and the main risks we are seeking to address, and how our changing approach to regulation will evolve. We are well placed to respond to the challenge. This plan is also aligned with our joint work with the Financial Conduct Authority (FCA) to develop our respective pensions strategies, and we expect to update our stakeholders over the summer on the outcome of this work.

We will be delivering some important work over the course of this three year plan, for instance driving up standards of trusteeship and stewardship across all schemes, including in public service (PS) schemes. We are working with professional trustees to develop and maintain professional standards. Additionally, we are targeting trustees of smaller schemes where they are perhaps less well-engaged or under-resourced, being clearer with them as to the standards we expect of them and helping them to reach the standards we expect.

We are also gearing up to authorise the first master trust schemes from October 2018 and to deliver the ongoing supervision regime. We have been engaging with existing master trusts to help them prepare for this new framework. We will finalise our code of practice and guidance alongside the regulations this year.

While DB schemes are no longer the dominant form of provision in terms of numbers of people saving, they still hold the vast majority of assets. Parliament has given us a mandate to balance the protection of pension savers, the Pension Protection Fund (PPF) and the needs of employers to invest and grow their business. We therefore have to make complex decisions on where we intervene to maintain a balance between a strong employer and well-funded schemes, and we will continue to insist on effective and integrated risk management.

We clarify our expectations further in relation to DB schemes in our Annual Funding Statement, which highlights the key issues we see facing schemes which have forthcoming valuations.


Foreword

Mark Boyle Chair April 2018

Lesley Titcomb Chief Executive April 2018

We welcome the government’s White Paper on protecting defined benefit (DB) pension schemes, and our new powers to enable us to better deliver on our statutory objectives. We will continue to work with government to implement the proposals set out in the paper.

Saving into a pension is becoming the social norm thanks to the success of automatic enrolment (AE), and we will be working to make sure new and existing employers continue to comply with their legal duties, including the increasing contribution rates in April 2018 and April 2019. We are also working with the government to take forward the findings and recommendations in the December 2017 AE review.

Our people are key to delivering our expanded remit and workload. We will increase our headcount this year by a further 12% and will continue to develop our agile, skilled and diverse workforce, through the course of this plan. We will also improve our systems and processes, while continuing to support our staff to develop their skills, knowledge and productivity.

We have updated our Key Performance Indicators for this year, consistent with our intention to be clearer, quicker and tougher. In implementing our new approach to regulation this year we will further develop and demonstrate our effectiveness through other appropriate measures of our performance.

One thing is certain, it will be another challenging year, but we are in an excellent position to take on those challenges and to address the issues and risks that face us and those we regulate.


Our vision and values Our vision is to be a strong, agile, fair and efficient regulator. Through this we seek to gain the respect of employers, trustees and other stakeholders.

Together with our partners in the pensions industry, in government and among employers, we will drive up standards of trusteeship and improve savers’ understanding of their situation to create better outcomes in their later life.

We are committed to making TPR a great place to work and doing all we can to support our people to reach their full potential.

We hold certain values, which we believe are central to the delivery of this vision, and they are to be:

� committed to the pursuit of good outcomes for workplace savers

� bold and impartial in our decision-making

� alert and responsive to emerging risks and opportunities

� supportive of our people

� united as one team


Introduction Our mandate derives from statutory objectives, which are set out in the Pensions Act 2004, amended by the Pensions Acts 2008 and 2014. These are:

� to protect the benefits of members of occupational pension schemes

� to protect the benefits of members of personal pension schemes (where there is a direct payment arrangement)

� to promote, and to improve understanding of, the good administration of work-based pension schemes

� to reduce the risk of situations arising which may lead to compensation being payable from the PPF

� to maximise employer compliance with employer duties and the employment safeguards introduced by the Pensions Act 2008

� in relation to DB scheme funding, to minimise any adverse impact on the sustainable growth of an employer

Our Corporate Plan aligns with the DWP’s single departmental plan, specifically Objective 3: ‘Increasing savings for, and financial security in, later life’. See more at http://bit.ly/DWP-plan18.

We work with trustees, employers and business advisers of occupational pension schemes in the private and public sectors, to help them understand their legal duties and the standards we expect. This includes working with employers and their advisers to ensure compliance with AE duties.

Our approach to risk and regulationAs a risk-based regulator with limited resource, the approach we take is informed by our statutory objectives, which are interpreted through our corporate priorities and informed by our assessment of the key risks facing the schemes and employers we oversee.

We judge risks in terms of the threat they pose, the extent to which we can mitigate them and our risk appetite. This means we will not seek to intervene in all situations but will prioritise by risk, cost and perceived benefits in a way that is targeted and proportionate. We will, however, work to ensure there is compliance with basic duties by those we regulate.


We are also improving the way we use our data and increasing our horizon scanning and the use of intelligence in order to better target and prioritise our work based on the risks we want to reduce. This includes working with our regulatory partners to deliver good outcomes for retirement savers, and responding to our new remit on the authorisation and supervision of master trusts. We will continue to develop our approach over the course of this plan.

We have a wide range of powers that we use flexibly, reasonably and appropriately. We are likely to take enforcement action where we encounter wilful or persistent non-compliance, where our earlier efforts to encourage compliance with the law have not had the desired effect, or where we uncover evidence of malpractice.

Introduction

We have a wide range of powers that

we use flexibly, reasonably and appropriately


The pensions and risk landscape

Pensions landscapeThe pensions landscape has evolved rapidly over the past few years and continues to transform, in terms of its overall size and the types and numbers of schemes available, as well as the risks faced by them.

Over nine million employees have now been enrolled into a pension as a result of AE, and over one million employers have now complied with their AE duties. AE has led to a vast increase in DC memberships and, as expected, employers have been putting their staff into DC contract-based and trust-based pensions (mainly master trusts) rather than setting up new DB arrangements.

Memberships of occupational DC schemes now exceed those of private sector DB schemes. Occupational DC membership has increased to 12.6 million – up by 29% over the past year and by 460% since the start of 2012. In the same period private sector DB membership has declined from 12.6 million to 10.9 million. In addition, there are 16.5 million memberships in PS pension schemes.

Around 10 million people are now members of master trusts – with over £16 billion of assets invested. In 2012 there were around 300,000 memberships of master trusts.

Total memberships in DB and DC pensions

2012 2013 2014 2015 2016 2017 20180

Num

ber

of m

emb

ers

(mill

ions

)

4

8

12

14

16

18

20

10

6

2

Private sector DB

Private sector DC (occupational)

Private sector DC (all workplace)

Our latest figures show that £5.4 billion was contributed into non-micro occupational DC schemes last year, an increase of more than 21% year-on-year. The assets in non-micro DC trust-based schemes amount to £48 billion1 (an increase of 174% since the beginning of 2012), while over £1.5 trillion of assets are held in DB schemes.


The pensions landscape

In 2012, around two-thirds of private sector workplace pension scheme members were in DB schemes. Of the DC members, two-thirds were in contract-based schemes which are regulated by the FCA. Since the start of AE, DB membership has declined by 15% to just under 11 million, while occupational DC membership has increased to over 12 million.

There are now nearly 30 million private sector workplace memberships. Last year’s plan showed that workplace total DC membership exceeded private sector DB membership for the first time in 2016. This year’s figures also show that occupational memberships of DC trust-based schemes now exceed private sector DB memberships.

Risk landscapePeople are typically living longer and spending more of their life in retirement, although the rate of increase is showing signs of slowing down.

While the majority of pension assets remain in DB schemes, the closure of a number of these schemes and the impact of AE is increasing the number of people saving into DC schemes. Additionally, as a result of the pension freedoms, some retirement savers have transferred from a DB pension to a DC pension so they can access their savings earlier.

There are a number of macro trends that are influencing our corporate priorities and the work we plan to do:

1. The impact of changes in the economic and political environment. We will see challenges for schemes and employers as the economy transitions to a post-Brexit trading environment. Schemes with employers in certain sectors (those with integrated supply chains or heavy reliance on common standards, for example) will need to reflect on any potential impacts on employer covenant. The prevailing market volatility poses challenges for scheme investments, as well as continuing low interest rates. As we see continued market volatility there is the potential for fluctuations in the value of assets, which may also impact confidence in pension saving.

2. A general shift towards an ageing population. The wider implications for society of an ageing population, the increasing numbers of people reaching retirement, and the impact of pension freedoms, increases the risk of members making inappropriate decumulation choices. For our approach to DB scheme regulation, we see heightened risks where schemes do not appropriately manage their cash flow needs as they mature and move into the decumulation phase.

The impact of AE is increasing

the number of people

saving into DC schemes


3. Opportunities and threats from the increased use of technology. Schemes’ abilities to exploit opportunities around improvements in technology and automation will be dependent on their standards of governance, record-keeping and data management. There will be an ongoing challenge to the pension sector’s ability to ensure security of information and of assets – the rise in cyber crime could see pension schemes being increasingly targeted.

4. As a result of AE, millions of people are saving into pensions for the first time. Now that all existing employers have reached their staging dates, we have seen low levels of employees opting out to date. For AE to continue to be a success, it is important that those new to pensions have a positive initial experience. At a micro level, stretched household finances and changes in working patterns may have a negative impact in the form of individuals’ propensity to save (driving up cessations and opt-outs), particularly as contributions rise in April 2018 and April 2019. In some cases, these circumstances could also make people more susceptible to scams. In terms of the wider landscape, we have seen master trusts become the savings vehicle of choice for the majority of new members. While this allows members to benefit from scale, it also creates a concentration of risk with the impact of any governance failures being heightened in these schemes.

These macro trends present a number of implications for the sector and they increase the importance of the need for resilience and adaptation within the pensions industry. It is increasingly important that the pension sector has the ability to manage volatility and risks. These trends also increase the need for long-term planning and stress the importance of the sector’s ability to manage risks for the longer term.

A constrained or uneven economic growth environment may have a disproportionate impact on certain sectors of employers sponsoring pension schemes.

Our recently published joint strategy discussion document with the FCA is developing these views further. We will publish our conclusions on this consultation over the summer.

The pensions landscape

It is important that

the pension sector has the

ability to manage volatility and risks


Our prioritiesOur assessment of the risks we see in the landscape, including the key macro risks we set out above, helps us to develop our priorities for the next three years.

Our priorities remain closely aligned with those in last year’s plan and will continue to evolve, particularly in light of our ongoing work to strengthen and enhance the way we regulate in the future.

The eight priorities below reflect our current outlook for the next three years (2018 through to 2021). However, the specific activities we have outlined under each priority relate to the 2018-19 financial year.

Enhancing and executing effective regulatory approaches across all schemes

Intervening effectively and efficiently where appropriate

To address the range of risks we see affecting schemes, we will be intervening more widely and tailoring our approaches to the specific risks and circumstances. This will enable us to use our resources more effectively and to be clearer in our expectations, quicker to respond and tougher where we need to be.

To do this, we are developing different regulatory tools and improving the data we hold and the way we use it. We will also continue to conduct more visits and inspections.

This broader regulatory approach will encompass DB, DC and PS schemes presenting the highest risk to members.

To help educate the market, we will continue where possible to publicise our regulatory actions. An example of this will be our continued programme of thematic reviews in areas of specific risk we have identified, with a focus on ensuring good governance and value for members, as well as publishing reports to demonstrate how we have intervened. In addition, we will continue to lead on ‘Project Bloom’ with our strategic partners, which raises awareness of pension scams through our communications campaigns and taking action in the criminal courts against scammers.

1


Our priorities

Promoting good trusteeship through improving governance and administration

Effective regulation of DB schemes

Improving standards of governance, record-keeping and data in schemes

We want to see improved standards of governance across the whole pensions landscape – no matter what type or size – and this drives our ongoing 21st century trusteeship campaign that we will continue in 2018. If schemes fail to meet the basic duties, we will take action. Where schemes are unable to meet the standards of governance we expect, we will encourage them to explore consolidation into an alternative arrangement that provides good value for their members.

Trustees have a significant responsibility in protecting the benefits of their members. We are looking for trustees, especially chairs and professional trustees to have the right knowledge and understanding. We expect a balanced and diverse board that can challenge and understand advice, as well as having clear decision-making processes.

As part of this work, we plan to start reviewing and consolidating our existing guidance to make our expectations clearer. We will be focusing on the administration and data standards across all schemes (DB, DC and PS schemes). We will also be working with the government and industry on the implementation of the pensions dashboard, and driving good record-keeping standards in schemes.

Overseeing and intervening where necessary, to maintain the right level of funding and sponsor support of DB schemes so they can pay benefits as they fall due

We are committed to regulating as effectively as possible, so that members of DB schemes receive the benefits they are entitled to at retirement. We will focus particularly on the schemes that present the biggest risks and take action where funding is not appropriate for that scheme or against those who are seeking to avoid their liabilities.

We will continue to assess the DB landscape to highlight trends and respond to issues by setting out clear expectations of schemes through our DB landscape and Annual Funding Statement publications. We will seek to maximise good outcomes for all DB scheme members and demonstrate clear measures in achieving that aim.

As part of developing a broader reach and a more segmented risk-based approach, we will be focusing further on smaller DB schemes. Alongside this work, we will continue to engage proactively with larger schemes, making sure we are clear about our expectations of trustees in their specific circumstances. If we see a situation where we believe a scheme is not being treated fairly relative to other creditors, we are likely to intervene and if necessary use our formal powers.

We will continue to work closely with the DWP in implementing the recommendations of the DB White Paper, making revisions to our DB funding code, regulatory policy and practices where necessary.

2

3


Our priorities

Effective regulation of master trusts

Ensuring employers meet their ongoing automatic enrolment duties

Deliver the new authorisation and supervision regime

We will be open to applications from master trusts for authorisation from October 2018.

The master trust regulations will be laid before Parliament this year, and our draft code of practice and supporting guidance will be finalised to support master trusts in meeting our expectations of them.

In delivering the new authorisation and supervision regime, we will continue to engage with the UK’s master trusts before they apply for authorisation. We will clearly set out the standards they will need to meet, and we will work closely with those who intend to exit the market, to encourage a smooth transition process.

A focus on new employers’ compliance, contribution increases, and the re-enrolment and ongoing duties of employers

With all existing employers having passed their staging dates and workplace saving in pensions becoming the norm for UK employees, we will be ensuring that employers continue to meet their ongoing legal duties. New employers also have a requirement to fulfill their AE duties.

In line with our expectations for all employers, we will continue to focus on ensuring pension contributions are paid to schemes on time and that they are in keeping with the contribution rate changes as they come into effect.

We will be taking forward the findings and recommendations of the 2017 AE review, and we will also continue to work with other government departments to strengthen our data sharing and intelligence.

4

5


Our priorities

Preparing for the impact of Brexit

Equipping our people to meet the challenges we face

Building understanding and resilience, with an appropriate regulatory response to the Brexit outcome

We will continue to work closely with the government and wider pensions industry to build our understanding and response to the potential effects of Brexit on schemes.

This work will include responding to any changes to European pensions law and requirements into UK law, and assessing the implications for cross-border schemes.

As further analysis of the effects of Brexit on UK pension schemes becomes available, we will provide specific guidance to schemes and the industry where appropriate.

Being flexible within a changing landscape and remit

We want our people to reach their full potential, and we will continue to strive towards this through effective performance management and development opportunities for staff at every level of the organisation.

We need to remain flexible in the face of the challenges to meet our objectives. To do this, we will be evaluating our job roles and our approach to reward so that it encourages high performance. We will build our culture to be more adaptable and flexible, which will help us respond quickly to the challenges.

We have high staff engagement levels and will continue to support staff through a dynamic and supportive workplace, providing training and development programmes and by attracting, developing and retaining staff with the right skills to meet the needs of our organisation.

In addition, we are developing the data, processes and systems we use so that as an organisation we can be more targeted and efficient and enable our staff to be increasingly effective.

We are proud to promote the development of equality and diversity of our workforce and will be developing this further. As our organisation develops, we will support our staff by effectively managing change, and maintaining our focus on staff wellbeing and mental health through our Time to Change pledge and Disability Confident award levels.

6

7


Our priorities

Delivering The Pensions Regulator of the future

Developing an approach to regulation that focuses on more proactive and targeted work and uses a wider range of regulatory interventions

Having worked closely with our wide range of stakeholders, who have added to our understanding of the changing regulatory landscape over the last year, we continue to design and roll out a new operating model for regulation – known as ‘TPR Future’.

We will be improving and expanding our oversight of those we regulate so we can identify risk earlier and more effectively. We will also be making more use of standards-based regulation, building on our compliance insight and tailoring our approaches to different sectors of the market to drive the best outcomes with the resources we have.

We are working with our regulatory partners, stakeholders and advisers to deliver a comprehensive and consistent framework of regulation, communication and tools for trustees, employers and members. We are also working with the FCA to develop our pensions strategies as part of our ongoing collaboration with them and other partners to protect members’ benefits.

We will give more detail of our changing regulatory approaches over the summer, clarifying the implications for those we regulate. We will then be implementing these changes over the course of this Corporate Plan.

8

In addition to these specific priorities, there are many regulatory and support functions that we continue to perform. Some of these are required by law, others are ongoing activities needed to operate effectively and execute our functions. Our structure will ensure we have the right people in the right place for the effective governance of our organisation and the delivery of our statutory objectives.


EvaluationWe measure our impact and performance in a number of ways. Key Performance Indicators (KPIs) are used to demonstrate progress against our corporate priorities. We have also defined four Outcomes to demonstrate achievement against our statutory objectives, reflecting that we must work with other stakeholders in addressing the risks in the wider pensions landscape.

The revised Outcomes set out below are reflected in the formation of this Corporate Plan. We are now revising our Key Outcome Indicators (KOIs), through which we will track progress.

We provide a review of our performance, including key indicators and achievements, at the end of each financial year in our annual report and accounts.

Our revised Outcomes Our work as a regulator takes place in the context of broader public policy objectives for pensions, such as ensuring individuals save enough to have a decent income in retirement.

This Corporate Plan has been developed in alignment with the following proposed outcomes which are closely aligned to our statutory objectives:

1. Assured participation in workplace pensions savings Workers are automatically enrolled and contributions are paid.

2. Protected members and PPF Members receive their entitlements from a well-run scheme.

3. Capable regulated entities held to account Entities understand what they must do, are able to do it and know the consequences of not doing so.

4. Confidence in the security and quality of workplace pension savings Members can reasonably expect their savings to be in safe hands.

We will define KOIs during this financial year and provide trend analysis in future annual reports. We will say more about our refreshed regulatory outcomes and the associated measures when we publish more about our new approach to regulation over the summer.


Area and relevant priorities

Key Performance Indicators 2018-19 Target

Defined contribution 1, 2, 4

1.1 The proportion of draft applications received that will receive feedback on the information submitted within the master trust readiness review application window.

100%

1.2 The proportion of master trust authorisation applications that will be referred to the Determinations Panel within 20 weeks of a full and complete application having been received.

90%

1.3 Establish which master trusts intend to exit the market and engage with all of them so they ensure their exit takes place in a controlled way.

100%

Table: Our KPIs

Evaluation

Key Performance IndicatorsOur KPIs continue to evolve to reflect the changing landscape, our new regulatory duties, emerging risks and our corporate priorities.

Our KPIs represent targeted measures of our internal performance. These are largely within our control and are as key to evaluating our performance against our statutory objectives for consistency. We have based our suite of KPIs for this Corporate Plan on last year’s measures, while adding to them where appropriate to demonstrate performance against new areas, such as master trust authorisation.

We will continue to develop our methods of measurement so they remain relevant, as objective as possible, and are the clearest indicators of our performance.

Our KPIs link to our eight corporate priorities:

1. Enhancing and executing effective regulatory approaches across all schemes

2. Promoting good trusteeship through improving governance and administration

3. Effective regulation of DB schemes

4. Effective regulation of master trusts

5. Ensuring employers meet their ongoing automatic enrolment duties

6. Preparing for the impact of Brexit

7. Equipping our people to meet the challenges we face

8. Delivering The Pensions Regulator of the future




Public service 1, 2

2.1 We will proactively engage with the highest risk cohort of schemes to improve standards of governance and administration.

100%

2.2 We will subject a proportion of the high risk cohort to high intensity regulatory oversight2 in the first year of adopting this new regulatory approach.

10%

2.3 For the cohort of schemes where we have intervened, we have either concluded that no further action needs to be taken or opened a formal investigation with a view to using our powers within 12 months.

90%

Governance and administration 1, 2

3.1 Trustees and employers are provided with our clear expectations of them, through:

� our ongoing campaign work

� publication of the outcome of our thematic reviews

� revised guidance and new guidance on bulk transfers

� publication of our new master trust code of practice and initial guidance

Key activities achieved

3.2 A high proportion of members are in schemes that have completed a scheme funding valuation or are compliant with the requirements to notify us of the breach.

97%

3.3 Where recovery plans are not received in line with requirements, we have concluded that no further action is required or opened a formal investigation with a view to using our powers within 12 months.

95%

3.4 A high proportion of scheme members will be in schemes that have provided their scheme returns to us in line with the requirements.

99.5%

3.5 The number of Trustee toolkit module passes. >14,000

Evaluation




Defined benefit 1, 2, 3

4.1 The proportion of assessed DB scheme risk3 we have engaged with during the last three years.

70%

4.2 Percentage of scheme funding valuations where we opened an investigation and, within nine months of the valuation submission date, we have either determined that no further action is required, or we have formalised our view on the use of our powers.

80%

4.3 We will maintain the significantly increased level of proactive casework ahead of formal valuation that we achieved in 2017-18.

Increased level

maintained

4.4 In DB enforcement cases, we will achieve the same number of the following outcomes during 2018-19 as we did in 2017-18; warning notices, judgments at the Determinations Panel, Upper Tribunal or other court and settlement.

Increased level

maintained

Automatic enrolment 1, 5

5.1 A high proportion of the employer population has a qualifying scheme ultimately in place.

90%

5.2 A high proportion of the jobholder population has been ultimately put in a qualifying scheme.

94%

5.3 A high proportion of employers make contributions to their respective scheme before they become materially late.

94%

Corporate 7, 1, 8

6.1 Our employee engagement score as per our independent survey.

75%

6.2 Proportion of roles filled within three months. 70%

6.3 Staff agree that their performance has improved as a result of skills, knowledge or behaviours developed over the last year.

70%

6.4 The TPR Future programme will deliver its milestones: 1. Regulatory strategy defined and function established. 2. Horizon scanning cycle complete. 3. Implemented new approach to setting regulatory expectations, including guidance and relationship management. 4. Regulatory oversight and enforcement functions established and associated tools implemented.

Key milestones delivered

Evaluation


Resource distribution by directorate for 2018-19

Our structureTo work as efficiently as possible, we need an agile and responsive workforce. To maximise our impact, we expect our resources to be divided across the organisation in 2018-19 as follows:

16% Automatic enrolment4 AE cases and enquiries, industry liaison and design and delivery of employer compliance duties

20% Regulatory policy Policy, research, risk, data, actuarial, investment, legal and business analyst teams

1% Data team

34% Frontline regulation End-to-end regulatory

process. All non-AE cases and enquiries, customer support and intelligence

19% Finance and operations

IT and change, financial management,

procurement and facilities management, Corporate Governance

including Board and Determinations

Panel support

6% Communications3% HR 1% Corporate The CEO office and Regulatory Assurance

Based on total headcount split by directorate


Financial summary

FundingOur funding is derived from two main sources: a grant-in-aid from the DWP which is recoverable from a scheme levy relating to Pensions Act 2004 duties, and a separate grant-in-aid from general taxation relating to the AE programme arising from Pensions Act 2008 duties.

Since the last Spending Review settlement in 2015, we agreed obtained agreement from DWP for additional spending for 2017-18, as outlined in the 2017-18 Corporate Plan. This was to address key challenges including implementing the new master trust regime and increasing our frontline resources to undertake higher volumes of casework more quickly and proactively.

We made good progress last year in addressing those challenges and we now plan to enhance our approach and further increase our reach as part of the TPR Future programme - our new approach to regulation. We have therefore agreed with DWP additional levy expenditure of £9.8 million in 2018-19, and £12.2 million in 2019-20, compared to the amounts set out in last year’s Corporate Plan.

We have also agreed additional spend for our AE activities, to develop how we will regulate AE in future years. We have agreed with DWP an additional £1.2 million (2018-19) and £3.1 million (2019-20) compared to last year’s plan.

2017-18 financial resultsThe table in the next section compares the 2017-18 full year spend to the budget. The categories shown illustrate the major areas of expenditure. The forecast spend in 2017-18 of £84.3 million is £0.2 million above the original budget agreed with the DWP of £84.1 million. However, the overspend was pre-agreed during the year. The main reasons for the permitted overspend were:

� higher costs incurred in our enforcement cases (£2.7 million)

� higher use of professional services (£0.3 million)

Offset by:

� not calling upon certain AE reserves set aside (£1.7 million)

� lower spend on our change projects (£1.1 million)


Financial summary

2018-19 budgetThe budget for 2018-19 shows an increase of £4.3 million against the full year spend in 2017-18. The main reasons for the increase are:

� Increase in salary costs (£5.9 million) reflecting the growth in headcount in both 2017-18 and in 2018-19, largely reflecting increased levels of regulatory activity.

� Increase in non-payroll, other staff related costs and professional services spend (£1.8 million) mainly to support project activity.

� Additional communications spend (£1.0 million) due to forthcoming scams campaign.

� Increase in related accommodation and other general office costs (£0.5 million).

Offset by:

� Reduction in contractual costs (£4.3 million) mainly due to the completion of AE roll-out to the large number of small and micro employers.

� Reduced call on consultancy services (£0.6 million) supporting project activity.


Category2017-18 actual5 (£000)

2017-18 budget (£000)

2018-19 budget (£000)

Income (22) (16) (16)

Salaries 41,843 42,068 47,697

Non-payroll staff costs 1,983 1,386 2,229

Other staff costs 2,413 2,347 3,006

Consultancy 2,711 737 2,130

Professional services 6,527 6,114 7,513

Communications 770 1,056 1,745

Managed contracts 21,735 23,805 17,441

Accommodation/general office costs 4,015 4,181 4,560

Telephony/internet 248 360 302

Fixed asset costs 806 700 700

Depreciation 1,287 1,343 1,354

Total 84,316 84,081 88,661

Table: High level cost summary

Financial summary


2017-18 (£000) 2018-19 (£000) 2019-20 (£000) 2020-21 (£000)

Levy 44,116 52,396 53,546 54,512

AE 40,200 36,265 42,018 36,651

Total 84,316 88,661 95,564 91,163

2017-18 2018-19 2019-20 2020-21

Levy 371 442 501 521

AE 220 218 215 199

Total 591 660 716 720

Table: Four year cost summary

Table: Average FTE analysis

Staff numbersThe table below shows the 2017-18 actual FTE staff numbers, and the projected average up to 2020-21. The increase in 2018-19 and 2019-20 in levy reflects the additional staff required to fulfil our broadened responsibilities and to implement our new regulatory approaches. Staffing levels in AE remain broadly similar with slight reduction in the longer term as efficiencies are achieved due to better use of data.

Financial summary

A comparative analysis of the full year actual spend for 2017-18 compared to the budget over the future three years, split by our levy and AE funded activities, is shown in the table below. We continue to revisit and update the future spend profile each year to reflect the latest known information and plans.

The levy costs increase over the period to reflect the growth of staffing to respond to our growing regulatory remit and approaches, and our technology and data investment plans for the next three years. The AE costs fluctuate over the next three years, reflecting the cyclical nature of employers’ AE duties, particularly re-enrolment dates, but with an increase in expenditure in 2019-20 as we commence a programme of work to prepare for the future AE strategy and operating model. This is required as a result of our key outsourcing contract ending during 2021.


End notes1. All financial amounts relate to Occupational DC schemes with 12 or more members (so exclude micro DC and Hybrid DC). See www.tpr.gov.uk/dc-trust for more detail.

2. High intensity regulatory oversight in this case relates to one-to-one relationship management with a subset of schemes.

3. DB scheme risk is measured as the funding and investment risk that may not be supportable by the covenant; namely a combination of the level of underfunding in the scheme taking into account the strength of the employer covenant and scheme maturity compared to the current cash contributions being paid; and the additional deficit that could arise from the investment strategy in the future, which may not be supportable by the covenant.

4. A core element of our AE delivery is through our outsourced partner (full time equivalents (FTE) not included).

5. Subject to final audit.

How to contact usNapier House Trafalgar Place Brighton BN1 4DW www.tpr.gov.uk

Corporate Plan 2018-2021 © The Pensions Regulator May 2018

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